WHAT DO VARS TELL US ABOUT THE IMPACT OF A CREDIT SUPPLY SHOCK?

Haroon Mumtaz, Gabor Pinter and Konstantinos Theodoridis

International Economic Review, 2018, vol. 59, issue 2, 625-646

Abstract: In the aftermath of the recent financial crisis, a variety of structural vector autoregression (VAR) models have been proposed to identify credit supply shocks. Using a Monte Carlo experiment, we show that the performance of these models can vary substantially, with some identification schemes producing particularly misleading results. When applied to U.S. data, the estimates from the best performing VAR models indicate, on average, that credit supply shocks that raise spreads by 10 basis points reduce GDP growth and inflation by 1% after one year. These shocks were important during the Great Recession, accounting for about half the decline in GDP growth.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
https://doi.org/10.1111/iere.12282

Related works:
Working Paper: What do VARs Tell Us about the Impact of a Credit Supply Shock? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:iecrev:v:59:y:2018:i:2:p:625-646

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().